Liquidity

Liquidity is one of the most important practical considerations when trading prediction markets. A liquid market has many active buyers and sellers, tight bid-ask spreads, and large order books — meaning you can enter or exit a position quickly and at a fair price. An illiquid market may have wide spreads, shallow order books, and significant price impact when you attempt to trade.

For most prediction market retail traders, liquidity determines whether a market is actually tradeable. A contract that appears to have an attractive implied probability may be practically inaccessible if the bid-ask spread is 10 points wide or if only a few hundred dollars of volume have traded. Professional market makers often provide liquidity in return for the spread they capture, which is why active major markets (e.g., presidential elections on Polymarket or Kalshi) tend to be more liquid than niche questions.

Polymarket has historically led the industry in liquidity for high-profile political and financial markets, with some election markets reaching tens of millions of dollars in open interest. Kalshi has grown its liquidity substantially since gaining CFTC approval but generally sees smaller volume on individual contracts. Other platforms like PredictIt have structural caps (maximum $850 per contract) that limit liquidity.